When weighing the pros and cons of private school education, the decision often comes down to financial feasibility. The reality of thirteen years of K-12 tuition, followed by ever-increasing college tuition, drives many parents back into the public school classroom.
But private school is not just for the wealthy. Most schools offer a host of financial assistance programs through grants, scholarships, work study programs, and other ways to make a private school tuition possible across all economic lines.
“Many parents think they need to be wealthy to afford private school, and that is just not true,” says Christie Holman, chief financial
officer for the Walker School. “We have a variety of payment plans, and that is partially an effort to increase economic diversity.”
She estimates about one in six students at The Walker School receives some financial assistance, a figure that is the norm for most private schools in the area.
But if private school is on your horizon, financial planning should start early, and in earnest. The average annual cost for private school is more than $10,000.
“The first thing I tell my clients is to start an education fund when your children are born,” says John Michael Miller, a certified public accountant and financial planner from Marietta. “Don’t wait until it is time for them to go to school.”
While most private schools offer some financial resources, tuition is ultimately the responsibility of the family. So have a financial strategy in place as you narrow down your school choice.
Start with the school
Every school likely has different funding options, deadlines, and requirements so it is important for parents to reach out to each target school and determine what is available. The vast majority of financial aid is needs-based, with each school setting a target of what parents can expect to pay.
Sibling discounts are also offered at some private schools, so it’s worth asking the school if you are looking at multiple children potentially enrolled. At Westminster Schools in Atlanta, families with three children enrolled—and meeting income requirements—can receive up to $11,500 per child in financial aid.
The Archdiocese of Atlanta educates more than 11,600 students within its network of eighteen private schools, and has allocated more than $8 million in financial aid this year.
“We are working hard to keep tuition affordable and to keep our schools available for low- and middle-income families,” says Diane Starkovich, superintendent of schools, Archdiocese of Atlanta. “We always ask families to complete the financial aid process and see what amount of assistance may be available for them.”
Parents can determine their financial aid options at a host of schools by submitting one common application, the School and Student Services (SSS), which is available through the National Association of Independent Schools (NAIS). Most private schools are members of NAIS and use the SSS in calculating financial aid.
With all financial aid options, start the process in the fall for the next school year to ensure you meet all deadlines.
Research available tax credits
Parents can put up to $2,000 per year into a Coverdell ESA (Education Savings Account), and pull out any gains tax-free when used for qualified school expenses. Unlike a 529 plan which can only be used for higher education, a Coverdell ESA can be used for private school K-12 as well.
“You don’t get a tax deduction for putting the money into the Coverdell ESA, but you can get your tax break on the back end by pulling out the capital gains tax-free to pay for school,” explains Miller.
Early years and kindergarten tuition can also count towards the child care credit on your taxes, as well as any tuition for after-school programs beginning in first grade, and summer programs.
Parents can also explore having a relative pay tuition fees and earn tax savings. “A lot of grandparents or other relatives pay for the [student’s] tuition and the tuition can be excluded from the gift tax,” says Holman. “This is another opportunity to transfer wealth without a tax.”
Miller says up to $14,000 can be given to an individual each year without any gift tax, or the need to file a gift tax return. He noted this applies only to tuition paid directly to the school and does not apply to books, housing, or dining.
Take advantage of Georgia-specific plans
The Georgia Private School Tax Credit and the Georgia Special Needs Scholarship are two programs which direct public funds to private schools. The Private School Tax Credit allows taxpayers to receive tax credits for donations to Student Scholarship Organizations (SSOs), which in turn provide scholarships to parents of children who attend private schools.
Individuals can direct up to $1,000, and married couples, filing jointly, can direct up to $2,500 to the SSO of their choice. Taxpayers receive a 100 percent tax credit—not deduction—for the entire amount, and private schools receive funds to provide scholarships.
The Georgia Special Needs Scholarships provides funding to public school students to transfer to an approved private school. Students must meet eligibility requirements, and the average scholarship is around $6,000 per student.
While the majority of financial aid available for private school tuition comes directly from the schools, there are a number of organizations that offer grants and scholarships as well. These include local civic/social clubs, churches, businesses, employers, and corporations. Schools should have an idea of where parents can tap into these scholarships, so look to the school first for advice.
Parents can also visit FinAid at privateschools.com/scholarships, which maintains a list of scholarships available for private K-12 schools.
Private lenders, as opposed to the school itself, offer loan programs to finance all or part of private school tuition. NAIS advises families to work through a lender who specializes in educational funding, and review carefully the long-term cost of the loan.
Also consider a loan from your 401(k) plan, as opposed to taking money directly out before you reach retirement age.
“If you must use 401(k) money to pay for school, borrow against your 401(k),” advises Miller. “Then there will be no tax or ten percent penalty on the money as long as you pay it back.”
Consider the long term benefits
Most parents are drawn to a private school education for academic reasons, backed by statistical data that shows private school graduates enter college at a higher rate, and with more scholarship money than their private school peers.
For the Class of 2015, graduates from the three Archdiocesan high schools (Blessed Trinity, Saint Pius X, and Our Lady of Mercy) received nearly $47 million in college scholarships, not including Georgia’s HOPE scholarship monies.
At Walker School, Holman points to the high pass rate on Advanced Placement (AP) exams taken by graduates that reduce the cost of college.
For parents, years of sacrifice often pay off at graduation when their child’s college options are vast.
“Marist has a very strong reputation among universities, and it most definitely helped Scotty get accepted into very tough schools,” says Melissa Frantz, whose son is now a freshman at the University of Charleston on a soccer scholarship. “The individual attention [Scotty] got at Marist was priceless.”